Make labour more expensive?

JARED BERNSTEIN has a post up today entitled, "The minimum wage: time to start working on the next increase". In it, he argues that, you know, it's time to start working on obtaining another increase in America's national minimum wage. In support of his point, he produces this chart:That last, substantial rise in the minimum wage looks strangely familiar. In fact, it mirrors quite closely the sharp rise in unemployment that occurred over a similar time frame.Now, I wouldn't begin to suggest that the rise in the minimum wage caused all of that unemployment. And, generally speaking, I'm prepared to accept that in most cases, small increases in the minimum wage are less harmful than straightforward micro would have us believe (although it also seems to me that as a means to fight poverty, minimum wage rises are a far worse idea than other alternatives, like wage subsidies or, hey, tight labour markets). Still, this is terrible timing for a proposal like this. The unemployment rate for workers without a high-school diploma is currently 13.1%. For workers between 16 and 24 it's 16.0%, and for those between 16 and 19 it's 23.2%. These are not high marginal productivity workers. I'm trying desperately to think of a dynamic in which raising the cost of employing these people increases their employment, but I just don't see it. The only real mechanism I can imagine is one in which the rise in minimum wage redistributes money from rich owners of capital to poor workers with a higher marginal propensity to spend, thereby increasing aggregate demand. It is very hard to see how this effect could be big enough to increase total labour demand despite the higher wage, particularly given the relatively small number of workers impacted by the minimum wage. The real earnings of the poor is clearly a concern, but one would think that a reduction in unemployment among low-skill workers should be top priority for those that care about such things, not least because tight labour markets are likely to be most effective at generating broad-based, sustainable increases in real compensation.

When Wal-Mart Stores Inc. raises its minimum wage to US$10 an hour next year, Target Corp. and other competitors are going to face a dilemma: follow along and jeopardize profits or risk losing their best workers.

A few weeks back, when Walmart announced plans to raise its starting pay to $9 per hour, I wrote a column saying this was just the beginning of what would be a growing movement around raising wages in America.

A few weeks back, when Walmart announced plans to raise its starting pay to $9 per hour, I wrote a column saying this was just the beginning of what would be a growing movement around raising wages in America.

Minimum wage workers in Ontario will see a few more loonies on their paycheques this fall.
The province announced Thursday that its standard minimum wage will rise from $11 an hour to $11.25, effective Oct. 1. The increase follows a move last year by the Liberal government to first hike minimum from $10.25 to $11 an hour and then index future increases to inflation. Other types of minimum wage, such as that for people serve booze, will also rise.

The rise will take effect in October, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.
The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.
The National Minimum Wage rates from 1 October 2014, as recommended by the LPC, will be: